If you have acquired a bankruptcy notice or court order you must take action quickly to prevent future suffering. Owing somebody money known here as a creditor, can be any individual or organisation to whom you owe money. If you’re unfit to pay money to a creditor, the creditor will phone the Australian Financial Security Authority (AFSA) who will consequently dispense a bankruptcy notice demanding payment of that money.
As you would expect, there is a limit to the amount of money owing to creditors before they can phone the AFSA, and the minimum amount is $5,000. After the creditor has attained a final judgment, AFSA will issue you with a bankruptcy notice.
It’s crucial that you take timely action if you receive a bankruptcy notice from the AFSA. You will commit an ‘act of bankruptcy’ if you do not do any of the following:
- Abide by the bankruptcy notice in less than the requested timeframe reported on the notice (normally 21 days); or
- Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe declared on the notice (normally 21 days).
Committing an act of bankruptcy suggests that you give your creditor authority to apply to the Federal Circuit Court for a sequestration order, or in other words, an order that will make you lawfully bankrupt.
How does a Bankruptcy Notice get served to me?
A bankruptcy notice could be served to you in a number of ways; it can be validly served to you personally, by regular post, or hand delivered to your registered address. In certain circumstances, a bankruptcy notice can be served in digital format, either by means of fax or email.
If it’s not achievable for a creditor to serve a bankruptcy notice using any of the above methods, a court order can be obtained which allows creditors to serve the bankruptcy notice in a different way.
I have a bankruptcy notice, now what?
To adhere to a bankruptcy notice, you must do one of three things:
- You must pay in full the amount specificed in the bankruptcy notice; or
- Work out an agreement with the creditor, for example a payment plan over a specific period. The creditor must agree to the payment arrangements T&C’s. It’s always encouraged that the agreement is made in writing so you have evidence of the agreement.
- Get some insolvency advice. At this point, you must not delay and get some recommendations. If you have a notice of bankruptcy, just phone us here at Bankruptcy Experts Kalgoorlie on 1300 795 575 for a Free Consultation.
It is crucial to note that all of these actions must be taken within the timeframe listed in the bankruptcy notice (usually 21 days from the date of the notice).
Can I get my Bankruptcy Set Aside?
If justified, you can apply to the court to have the bankruptcy notice cancelled or set aside. This mustn’t be taken lightly however, because if there are unsatisfactory grounds to make an application then you will be under obligation to pay all the creditors legal expenses which only bloats the debt you owe to them.
If you do apply for your bankruptcy notice to be set aside, it’s always a smart idea to request that the court lengthens the timeframe for compliance with the bankruptcy notice, so you avert committing an act of bankruptcy while the court processes your application. Simply put, don’t leave it to the eleventh hour.
To have your bankruptcy notice set aside, one of the following conditions must apply:
- The debt claimed on the bankruptcy notice does not exist;
- There is a defect in the bankruptcy notice;
- You have grounds for a counter-claim, cross demand, or set-off, equal to or exceeding the volume of debt issued in the bankruptcy notice; or
- The bankruptcy notice is an abuse of process.
What if the debt claimed on the bankruptcy notice does not exist?
To substantiate that the debt claimed on your bankruptcy notice does not exist, you need to provide evidence that:
- You have in fact paid the creditor the amount owing under the order or judgement; or
- You have appealed the order by initiating proceedings to set aside the order or judgement.
In your application to set aside the bankruptcy notice, you can not simply say that you have a persuasive argument to do so. You must have already filed the appropriate documents with the court that handed down the order. Moreover, you must have the ability to supply evidence to the Federal Circuit Court that demonstrates that you have an authentic case for grounds of appeal.
Secondly, if you do not start the process of setting aside the judgement or order prior to filing your application to set aside the bankruptcy notice, the Federal Circuit Court will not have the capacity to lengthen the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. For that reason, you will have committed an act of bankruptcy.
What is a Defective Bankruptcy Notice?
A defect in the form or content of the bankruptcy notice results when the creditor has failed to follow the requirements of the Act, in which case you may have grounds to make an application for the bankruptcy notice to be set aside. Some defects are more severe than others, and not all defects will make a bankruptcy notice invalid as these defects can be addressed at the discretion of the court under s 306( 1) of the Act.
Usually, the defect must be considerable or result in confusion over the actions you must take to follow the bankruptcy notice for you to have the ability to set aside the bankruptcy notice.
There are some critical requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be invalid. The following details some examples where these vital requirements have not been met:
- The creditor’s address on the bankruptcy notice should make it reasonably practicable for the debtor to make payment (e.g. PO Boxes may not be appropriate);
- The creditor’s and debtor’s name on the bankruptcy notice must match the creditor’s and debtor’s name in the order or judgement;
- Attached to the bankruptcy notice must be a copy of the judgement or order;
- It is a requirement that there is a timeframe for compliance included in the bankruptcy notice;
- If the creditor is claiming interest on the debt owed to them, the calculations must be specified in a separate document attached to the notice; and.
- If any part-payments made by the debtor, or any other allowed reductions, the total amount of these deductions must be stipulated in an independent document attached to the notice.
The following lists some situations where bankruptcy notice defects have not been significant enough to make them invalid:
- Failure to include the ACN of the company who is the creditor; and.
- The creditor’s address is listed as the address of their solicitors (assuming payment can be reasonably made to this address).
There are several other legal requirements that should be born in mind. These include:
- The order or judgement must be at least $5,000, not including any post judgement interest being claimed by the creditor;
- A bankruptcy notice can still be issued if the total amount is lower than $5,000, provided that the total amount was in excess of $5,000 when the order or judgements were pronounced;
- A bankruptcy notice must be based on a final judgement or order that is currently owing to a creditor under s 40( 3) of the Act. A final judgement is defined as a judgement which finally disposes of the rights of the parties involved;
- A bankruptcy notice must be served with six months of its issue. The only exemption is if the Official Receiver (reg 4.02 A) has extended this timeframe;
- The final order or judgement must not be stayed both at the time of issue of the notice and the time of its service. If a stay of execution is granted after service, it has no bearing on the bankruptcy notice;
- An overstatement of the amount claimed to be owed to a creditor does not undermine a bankruptcy notice, except if the debtor contests the legitimacy of the notice within the timeframe for compliance (s 41( 5)); and.
- The order or judgment on which the bankruptcy notice is based can not be greater than six years old (s 41( 3)( c)).
Under what grounds could I counter-claim, set-off or cross demand?
To be successful using the grounds of counter-claim, set-off or cross demand, you will need to successfully demonstrate to the court the following two items:
- The counter-claim, set-off or cross demand is equal to or in excess of the total amount claimed by the creditor in the bankruptcy notice. You must also satisfy the court that these claims are legit and have a realistic possibility of succeeding; and.
- The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor secured the judgement on which the bankruptcy notice is based upon. Failure to benefit from the opportunity to counter-claim, including any detrimental personal circumstances (for example lack of evidence or legal counsel), will not suffice.
What is an Abuse of process?
An abuse of process occurs if you can substantiate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of an honest effort by the creditor to invoke the court’s jurisdiction in regard to bankruptcy. If the former is true, then you will have the option to set aside the bankruptcy notice as a result of an abuse of process. To succeed using these grounds, you will need to provide evidence of collateral purpose or undue pressure.
What If I feel that I have grounds to act on one of these items above?
If you feel that you have a case for one of the abovementioned reasons to dispute your bankruptcy, you will need to get the following documents prepared, filed, and served if you want to apply for your bankruptcy notice to be set aside:.
- Application (Form B2); and.
You can find the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either make an application for a final order or an interim order.
Final orders must outline the ideal result you want to receive and the legislative basis which the court can grant this decision. An example of a final order may be: “That bankruptcy notice (BN00231) issued on 15 June 2017, which was served to me on 1 July 2017, be set aside under section 30( 1) of the Bankruptcy Act 1966.” You would also have to produce a copy of the bankruptcy notice with your application.
On the contrary, an interim order should detail any outcomes you wish before the application is finally decided upon, and the legislative basis which the court can approve this decision. An example of an interim order can be: “The time for compliance with bankruptcy notice (BN00233) be extended up to and including 7 days after the outcome of this application by the Court under section 41( 6A) of the Bankruptcy Act 1966.”.
If you wish to make an application, it must be accompanied by an affidavit which specifies the grounds of your application in conjunction with the date the bankruptcy notice was served to you. If you’ve already made an application to set aside the judgement of the bankruptcy notice, a copy of this application/s also needs to be attached. It’s critical that your affidavit must abide by rule 3.02 of the Rules, or else your application may be declined and your request for an extension of time to fulfill the bankruptcy notice may not be approved.
Filing your application.
When your documents are finalised, they will need to be filed with the courts either online or personally at the Federal Circuit Court Registry.
There is a lodging charge that will need to be paid, however in specific circumstances you can apply for a waiver of this fee.
Serving your documents.
Once you’ve lodged your application and affidavit and they have been stamped, you must personally serve these documents to the creditor within 3 days after the documents have been lodged.
If you are an individual, you must personally take the documents to the individual identified on the document and hand it to them. If they refuse to take the documents, the person serving them may put the document in the presence of the person to be served and verbally instruct the person what the documents consist of.
If you are a company, you must personally go to a registered office of the organisation and present the documents to a person servicing that business. You don’t have to hand the documents to the company’s principal workplace, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that businesses registered addresses.
If you would like another person to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a fee.
If you’re not sure whether you have grounds to set aside the bankruptcy notice, or you’re not sure whether you should invest the time and money to apply due to financial reasons, get in contact with Bankruptcy Experts Kalgoorlie on 1300 795 575 for free advice. Alternatively, you can visit our website for additional details: www.bankruptcyexpertskalgoorlie.com.au